Tariffs create uncertainty for exporters

Local exporters face a 10 per cent tariff on exports to the United States, but as one wine grower says, it’s the compounding flow-on effect of those tariffs and what it means for the global economy.

Richmond Plains owner Lars Jensen says everyone in the chain will try to maintain their margin including the importer, distributor and retailer in the US, which means customers will have to pay more.

“It could end up looking like 20 per cent for the end consumer. There’s a compounding flow-on effect. The weakest link in the chain will wear it the most and that may be the supplier.”

The small winery doesn’t export to the US market, but it is the largest market for the wine industry, and he says the tariffs will affect all markets anyway.

“What is bad for the global economy is bad for us,” he says. Such as the effect on the Canadian market, which is an important one for New Zealand where people are likely to buy less and cheaper wine because of tariffs.

“When you’re a small fish, you just have to wait and see how it pans out. But even talk of tariffs affects markets.”

Nelson Winegrowers Association chairman, Blair Gibbs, says the US blanket approach with tariffs is unwarranted and it will slow down exports to that market.

While the tariffs will make product more expensive for American customers, he says it is still uncertain how it will play out for New Zealand wine exporters. The US market is a strong market for New Zealand wine, but with the introduction of the tariff, he says those exporters exposed to the US will likely be looking to diversify their sales channels.

“We’re just a small pawn in big games.”

In farming, Federated Farmers Nelson president, Stephen Todd, says the tariffs have created uncertainty and both the dairy and red meat sectors have yet to see how it will affect them.

“It’s the unknown really. What is going on in the world is increasing that unknown a lot more. We just have to wait and see how it plays out.

“What worries me is the ripple effect around the world; people still have to be able to pay for our product. It will affect our (milk) payout pretty quickly and I think it will probably have a bigger impact on red meat.”

For pipfruit, the United States is not a major market for New Zealand. Heartland Fruit marketing manager says the company has been moving away from the US market and will not be sending fruit there this year.

“As an industry, New Zealand’s supply to the US has been reducing for the last few years as they have increased their own production, and New Zealand has tended to focus on the Asian markets. Some companies may still be sending a bit there because of their varietal makeup.”

Meanwhile, forestry has been granted temporary exemption from the US import tariffs, for much of its products.

New Zealand Forest Owners Association chief executive, Dr Elizabeth Heeg, says the majority of New Zealand’s timber and lumber products have been granted temporary exemption, providing some relief to forest owners.

The exemption will ensure timber exporters can continue to meet market demands without the additional financial burden higher tariffs would place on local forest owners.

She says some pressure may be felt by pulp, paper and glulam (glued laminated wood) producers, however, who are not exempt from the new tariffs.

She says the exemption will ensure New Zealand forest products continue to be a trusted and critical supply of timber and lumber for supporting construction and housing affordability in the United States.